Italy Confronts Referendum to Speed Up Lawmaking & Stabilize Its Government

Next Sunday, Italy confronts a referendum to speed up lawmaking and to stabilize its government. Italian Prime Minister Matteo Renzi presented the referendum to his country’s voters. Subsequentially, this referendum alters the constitution.

Italy Confronts Referendum to Save Banks

If the Italian referendum fails to pass, Italy faces even more potential trouble. First, the Italian referendum prevents the postponement of much-needed reforms. These reforms primarily impact the banking sector. Therefore, Italian banks remain at risk of failing. Additionally, the aftermath of the downfall for Italian banks maintains the potential of spreading throughout the rest of Europe.

Italy Confronts Referendum to Prevent Power Vacuum

Second, Italy needs to concern itself with a potential power vacuum. While Italy confronts the referendum to stabilize its government, Italian Prime Minister Matteo Renzi declared his resignation in the event the motion failed. As with any power vacuum, Italy would be left to face a period of political and sociological uncertainty.

More so, the failure of this referendum lends additional credence and power to political groups in favor of leaving the European Union, similar to the experience the United Kingdom went through with Brexit.

Possible Outlook of the Italian Referendum

As Italy confronts a referendum to speed up lawmaking and stabilize its government, many compare the situation to Brexit. In the wake of the Brexit vote in the United Kingdom, investors worry about further exits from the European Union. Ultimately, recent polls suggest a very close vote.

Overall, investors reacted to the economic and political uncertainty by shifting their holdings towards safer assets. For many, this includes United States mortgage-backed securities. Since mortgage rates depend on mortgage-backed securities prices, the news resulted in improvement.

Conclusively, the referendum passing reflects negatively for mortgage-backed securities. On the other hand, a failure of the Italian referendum displays positively.

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2022-04-02T15:28:43+00:00 November 28th, 2016|Categories: News|Tags: , , , |